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HOW GUESS? JEANS COULD SHAPE UP

Probably the only company with a question mark after its name, Guess? (GES) failed to guess right in timing its initial public offering. When it went public in August, the IPO market was in a funk. So Guess? had to cut the offering price from 23 to 18 and the number of shares offered from 9.2 million to 7 million. Since then, the stock has slumped to 12. Time to dump this designer and maker of jeans and other casual apparel?

By no means, say some pros who have been accumulating stock. ''The name Guess? is a franchise known worldwide, and its stock is compellingly cheap, based on what management has shown so far in beating the Street's estimates,'' says money manager Michael DiCarlo of DFS Advisors in Boston, which has acquired 1.2 million shares. In light of its sales and earnings, Guess? is ''a very inexpensive stock,'' says DiCarlo, who thinks it should be worth about 25.

Another money manager, who has also been buying, says more impressive numbers will appear in 1998, when a big push overseas will show up in profits. Analysts haven't yet come up with estimates, but this pro figures Guess?, which operates more than 1,230 U.S. shops inside department stores and 115 stores of its own, will make $1.86 a share in 1998, a 21% rise from consensus 1997 estimates of $1.53. Some 35% of the estimated 1997 earnings will be contributed by foreign sales. In 1998, that contribution will be 27%, on top of a larger base.

Analyst Brenda Gall of Merrill Lynch notes that the Guess? price-earnings ratio of 9 is by far the lowest in its peer group. Guess?, she explains, is trading at a 42% discount to the apparel group and at a 55% discount to the Standard & Poor's 500-stock index. Based on estimated growth of 15% to 20% over the next five years, says Gall, the stock deserves a p-e of at least 13.

Foreign volume, figures Gall, should increase by more than 35% in 1997, fueled by sales agreements in countries where Guess? clothes and jeans aren't yet sold. Gall expects orders abroad in 1997's first quarter to be up about 30%, and she looks for stronger gains later in the year.

Orders in the U.S. for fashion merchandise--54% of total sales--that are scheduled for shipment in the first quarter of 1997 ''continue to run ahead at a double-digit rate,'' says Gall.

BY GENE G. MARCIAL



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Updated June 13, 1997 by bwwebmaster
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